Corporate governance analysis

Two questions sit under this work. What number is this firm actually trying to maximize? And if the firm is run badly, what are the odds that changes? The first answer fixes the objective the whole analysis serves. The second one is worth money, and it can be priced.

Governance is read first, not scored last. It decides which objective is legitimate, and it decides how much of any later recommendation management will act on. A board with staggered terms, a poison pill and no majority-vote standard can ignore an optimal debt ratio for years. That is a fact about the analysis, not a footnote to it.

Two rules that hold throughout

Weak governance is never an arbitrary discount to value. It enters the model in four named places: a low return on capital, a reinvestment policy that keeps funding sub-hurdle projects, a financing and payout policy that never moves, and a low probability of change. A haircut applied to the final number hides every one of those and cannot be argued with. Detail in value-of-control.md.